ZTE shares soar after US lifts ban
ZTE (HKG:0763) shares soared on Monday morning, after the US lifted a ban on trading that had jeopardised the company’s future.
US President Donald Trump intervened to end the ban, which was imposed in April after ZTE was found to have violated US sanctions against Iran and North Korea.
The company was forced to halt its major operations in the US, taking a serious hit to business and sending shares down nearly 40 percent.
The ban has now been replaced with a $1 billion fine and an additional $400m in a holding account against further violations, the US Commerce Department confirmed on Friday.
“While we lifted the ban on ZTE, the Department will remain vigilant as we closely monitor ZTE’s actions to ensure compliance with all US laws and regulations,” US Commerce Secretary Wilbur Ross said.
ZTE’s Hong Kong-listed shares rose 16 percent on the news, currently at 15.94HKD (0955GMT).
Debenhams denies cash crunch after insurer setback, shares fall
Debenhams (LON: DEB) is attempting to reassure the City that its cash position is “healthy” after an insurer cut cover to suppliers of the chain.
Major credit insurer, Euler Hermes, has been understood to reduced cover following growing concerns about the group’s ability to pay bills on time and in full.
A source from the credit insurance industry source has said that the decision has been carried out in order to “avoid unacceptable risk” and was a “similar sign to what other unsecured creditors might do.”
“There are a lot of companies out there in the scene that have a more traditional property portfolio and that are exposed financially,” they added.
The department store giant has insisted that its relationship with credit insurers was “constructive.”
The group has issued three profit warnings this year and has warned that full-year profits will be lower than expected.
The group blamed “increased competitor discounting and weakness in key markets” for the fall in profits.
Debenhams has said that market conditions have been “challenging” but it has “a clear strategy in place” and plans to take “decisive actions to strengthen the business”.
“All the credit insurers continue to provide cover to our suppliers and we maintain a constructive relationship with them. It is well-documented that market conditions are challenging, but Debenhams continues to be profitable, has a clear strategy in place and is taking decisive actions to strengthen the business,” said the group in a statement.
Debenhams is the latest retailer to come under pressure. Marks and Spencer (LON: MKS) have announced plans to close 100 shops, also warning that it could be forced to close more stores.
Poundworld said on Friday that it plans to close a further 80 stores, resulting in 1,024 job losses.
Shares in Debenhams slumped six percent in early trading.
Trump describes EU as a “foe” on trade
Donald Trump has described the EU as one of his greatest “foes” on trade.
Speaking in a TV interview for CBS News, the US President said that the trading bloc was “very difficult”.
“Well I think we have a lot of foes,” said Trump in Scotland. “I think the European Union is a foe, what they do to us in trade. Now you wouldn’t think of the European Union but they’re a foe.”
Trump then went on to list traditional rivals such as China and Russia, before saying: “EU is very difficult. I respect the leaders of those countries. But – in a trade sense, they’ve really taken advantage of us.”
In response to the interview on Sunday, Donald Tusk, the president of the European Council, tweeted: “America and the EU are best friends. Whoever says we are foes is spreading fake news.”
Trump has departed the UK for Helsinki, where he will meet with Russia’s Vladimir Putin.
The US President revealed he had “low expectations,” for his meeting with the Russian President.
John Bolton told ABC News that he expected to press Putin about election meddling.
“I find it hard to believe, but that’s what one of the purposes of this meeting is so the president can see eye to eye with President Putin and ask him about it,” he said.
“It’s very important that the president has a one-on-one conversation with President Putin and that’s how this is going to start off,” he added.
He’ll listen to President Putin’s response, and we’ll go from there.”
Trump’s visit to the UK was met with widespread protests. The President also gave a controversial interview with The Sun, where he criticised Theresa May’s approach to Brexit.
JP Morgan profits soar, shares rise
JP Morgan Chase & Co (NYSE: JPM) announced a record second-quarter profits on Friday, sending shares up one percent in pre-market trading.
The lender posted a profit of $8.3 billion, which is an increase of 18 percent from the same period last year.
“We see good global economic growth, particularly in the U.S., where consumer and business sentiment is high,” said CEO of the group, Jamie Dimon.
“Because of this broad growth and the strong underlying performance across each of our businesses, the company delivered record results this quarter. We also want to acknowledge that global competition is getting stronger.”
This is the 14th straight quarter that JP Morgan has topped analysts’ estimates.
The group’s loans increased by four percent to $948.4 billion.
Asos shares plunge 10pc on sales warning
Asos (LON: ASC) has warned that its sales growth this year will be at the lower end of forecasts, sending shares down ten percent.
The popular fashion retailer said that whilst it was on track to reach profit targets, sales growth will be “likely towards the lower end” of the expected 25 – 30 percent range.
Asos reported positive results for the four months to June 30 of the year, with a 22 percent rise in sales to £823.9 million.
“I am pleased with the way the business has traded over the last four months and we are on track with our plans for the year,” said the group’s chief executive, Nick Beighton. “We remain confident of delivering another year of strong growth.”
Despite the slowing sales, the online-retailer has benefitted from the growing consumer choice to shop online instead of on the high street where retailers including Marks & Spencer are being forced to close stores and cut jobs.
Profits for the group are still expected to increase, with analysts predicting the fashion retailer to report full-year profits of £101 million, £22 million more than the year before.
Sofie Willmott, a senior retail analyst at GlobalData, has said that continuing high levels of growth will be a “challenging task” for Asos.
“With such a strong track record and high expectations from stakeholders, ASOS must continue to innovate at a rapid pace to remain a leader in the online market,” she added.
Johnson & Johnson ordered to pay $4.7bn in talcum powder claim
Johnson & Johnson (NYSE: JNJ) has been ordered to pay almost $4.7 billion (£3.58 billion) to 22 women who have claimed the group’s talcum powder contributed to them developing ovarian cancer.
The US pharmaceutical giant was involved in a six-week trial in St Louis, where the 22 affected women claimed the Johnson & Johnson product contained and covered up evidence of the powder containing asbestos.
Mark Lanier, the lead counsel for the women, said: “We hope this verdict will get the attention of the J&J board and that it will lead them to better inform the medical community and the public about the connection between asbestos, talc and ovarian cancer.”
“The company should pull talc from the market before causing further anguish, harm and death from a terrible disease,” he added.
According to the lawyers involved, asbestos fibres and talc particles were found in the ovarian tissues of the women. Six of the women who developed cancer have died.
Johnson & Johnson have continued to deny that the use of their products has contributed to the development of cancer, calling the case “unfair”.
“The evidence in the case was simply overwhelmed by the prejudice of this type of proceeding. Johnson & Johnson remains confident that its products do not contain asbestos and do not cause ovarian cancer,” said the group in a statement.
“Every verdict against Johnson & Johnson in this court that has gone through the appeals process has been reversed and the multiple errors present in this trial were worse than those in the prior trials which have been reversed.”
The company has been sued by over 9,000 women who have also claimed that its talcum powder has contributed to their ovarian cancer.
Last year, the group faced a similar lawsuit which was dismissed due to the complainant’s arguments being too insufficient and vague.
Shares in the group fell over three percent in pre-market trading.
Glencore faces investigation from business litigation practices
Glencore plc (LON:GLEN) are facing investigation into alleged bribery and corrupt practice by litigation firms Quinn Emmanuel and Innsworth, following the subpoena by the US Department of Justice.
Quinn and Innsworth are both reputable in the world of business litigation, with the former leading proceedings in the RBS Rights Issue litigation and the VW emissions scandal. The firms will seek to represent their shareholders on issues raised by the UK Serious Fraud Office and the US Department of Justice.
According to its press release, Innsworth’s claim is based on the grounds that its, “[…] shareholders are entitled to seek compensation pursuant to the Financial Services & Markets Act 2000 (“FSMA”) and/or at law on grounds, allegedly, that Glencore has participated in, or had knowledge of, bribery and corruption, and failed to disclose relevant information to the market, or made misrepresentations, arising out of this and/or the risks of certain of its activities and business partners; and failed to disclose (or delayed disclosure) to the market of regulatory investigations.”
Earlier, Quinn Emmanuel’s Co-Partner, Richard East, commented that, “Glencore has a well-known appetite for risk and operates in many of the world’s most endemically corrupt countries, of which the DRC is a notable example. We are of the view that Glencore shareholders may be entitled to bring claims in England under the terms of the Financial Services and Markets Act 2000 in order to seek compensation for losses caused by Glencore’s alleged untrue or misleading statements and/or failures to disclose relevant information to the market.”
These allegations come after Glencore began releasing the records documenting its dealings in ‘high risk’ areas since 2007. Among these areas include the Congo, which is an indictment of a market built upon systemic corruption and bribery. Concerning Glencore, their dealings in the DRC have intimated a degree of cooperation with the state and mining tycoon Dan Gertler, who have a long history of financial malpractice.
Legal proceedings are expected to be held at the English High Court in London. Glencore’s share price stood at 397p before the UK SFO investigation began in May, today they stand at 314.6p, up 1.11 percent since markets opened this morning.
FTSE bounces back from trade war tensions
The FTSE 100 has risen ahead of expectations today, as it bounces back from a period of volatility caused by the tariff war between the US and China.
While the tensions have not been fully quelled, the implications of retaliatory tariffs have caused the culprits to take a breather; with technology, manufacturing and mining sectors suffering the immediate effects of tariffs, while high street retailers and the housing sector suffered the aftermath of depleted consumer confidence.
Today, with new revelations on the trade war running thin, markets across Europe have begun a recovery as liquidity has increased.
Fiona Cincotta, Senior Analyst at City Index, said, “Although the increasingly hostile trade relations between China and the US still form the backdrop for some of the equity trading this morning, for the moment the absence of news on this front is granting the market a brief chance to recover. European stock markets are moving gingerly higher this morning with the FTSE and the CAC both trading up 0.2% and the DAX up 0.4%. Strong earnings including from the likes of car maker Peugeot are helping the indices move higher.”
Since that comment, FTSE had risen 0.7 percent by midday and casualties of the tariff war, such as Airbus (LON:AIR), have rallied 1.05 percent since trading began. FTSE large cap risers include Sky (LON:SKY), who are up 2.81 percent due to the bidding war between Fox and Comcast. Also, Capita (LON:CPI) are up 6.8 percent following the announcement of a new government contract and offload of its subsidiary, Park Eye. Small cap risers include AFC Energy, who rallied 33.7 percent, and Xaar, who have rallied 6.1 percent.Capita shares rally with new contract and subsidiary offloads
Capita plc (LON:CPI) has seen its share price rally after turning round a year of loss, with the announcement of a long-term contract and the sale of its subsidiary, Park Eye.
The UK outsourcing firm confirmed today that it had secured a six year contract with the Department of Education; to print, distribute and collate Key Stage One and Two primary school assessments.
The contract will phase in the new assessment papers between September 2018 and September 2019, and is reported to be worth £109 million. In addition to providing assessment material, the contract requires Capita to mark 4 million papers a year and provide a secure portal for 16,000 schools and 4,000 test makers to access results and update records in one place.
This new development is a perfect combination for the firm. Not only does it further Capita’s interest in alligning itself with more central government contracts, but harnesses its extensive software capabilities and experience in working on public sector contacts. In a statement, the company’s Chief Executive Jon Lewis said:
“Capita is an established and experienced partner to the education sector and this contract further reinforces our strategy. We look forward to using our technology and service management capabilities to identify and deliver efficiencies and improvements ensuring both value for money and a positive experience for schools across England.”
In addition to this, Capita’s new CEO has taken steps to further his plans to simply the company and focus on turning a profit within the firm’s core assets by 2020. The mantra being – doing “[…] fewer things better”.
After selling its Supplier Assessment Services a month ago for £160 million, the firm announced last Thursday that it had finalised a deal to offload Park Eye to Macquarie for £235 million. As a result, Capita are well in excess of their £300 million disposals target set back in April, with Jon Lewis announcing that the move to sell off Park Eye marked, “[…] a further step in executing the strategy announced in April aimed at simplifying and strengthening the business to deliver future success”.
The firm have suffered losses from over-extending themselves and have been forced to terminate contracts without having any means of replacing those contracts with new ones. Going forwards, the company will hope to benefit from their structural remodeling and capitalise on the revenues accrued in its rights issue in May, which saw it sell over 973 million new shares and raise £681 million.
The firm’s share price has rallied 5.71 percent or 9.2p, to 170.35p per share, since trading started. Analysts from Shore Capital have reiterated their ‘Hold’ stance on Capita stock.
Tesla opens Shanghai factory amidst tariff tensions
Tesla Inc (LON:TSLA) are to open their first factory outside of the US, with CEO Elon Musk meeting Shanghai’s mayor Ying Yong to make the announcement yesterday.
The new factory is being built with a multiplicity of factors in mind. Firstly, the reciprocal Sino-US tariff tensions now mean that a 25 percent duty will be added to every Tesla bought in China and shipped from Tesla’s US factory, which is an issue considering China is Tesla’s second largest market.
Secondly, China is the world’s fastest-growing vehicle market, with 28 million cars bought last year. This number is even more significant when one considers that the Chinese government is pushing an initiative for a minimum of 10 percent of all new cars sold to be electric.
Thirdly, it is estimated that the new factory will have the capacity to turn out more than 500,000 units per annum. This is an appealing thought for a company facing pressure for its losses and underproduction, especially on its new Model 3, which has only just hit its production target of 5,000 units per week. Additionally, Tesla’s cost per unit will drop as it outsources a large proportion of its production and thus labour cost to China.
“Tesla is deeply committed to the Chinese market,” said a Tesla spokesperson.
“The tariffs may have accelerated [Tesla’s] plans for sure, but longer term they need a presence in the largest auto market globally,” said Cowen analyst Jeffrey Osborne.
Following the announcement, Tesla added approximately $1.6 billion to its value in the first minutes of trading this morning – the consensus among most analysts is on a ‘Hold’ stance. The firm’s shares are currently trading at $322.47, up 1.24 percent or $3.96 since trading started.
Going forwards, Tesla will have to answer questions surrounding their business model and where they intend to draw the capital for this size of investment – which will trump Volkswagen and GM and become Shanghai’s largest source of foreign investment to date. Other companies have been weary of venturing into China on account of having to share their technology with other firms. However, as proven by Tesla’s rise sparking an electric revolution – Fiat-Chrysler and Maserati being the most recent to join the trend – CEO Elon Musk wants to spread the electric vehicle market and technology, not monopolise it.